U.S. Service Sector Growth Slows to 1% Annualized GDP, First New Order Decline in Two Years as Middle East War Dampens Demand

According to S&P Global Market Intelligence Chief Economist Chris Williamson, on May 5, U.S. service sector growth momentum has notably slowed, with annualized GDP growth at approximately 1%. The service sector reported its first decline in new business orders in two years, reflecting intensifying demand impacts from the Middle East conflict.

Direct war effects are most pronounced in services, as elevated prices have reduced discretionary spending on holidays and entertainment, while high fuel costs and travel disruptions have dampened transportation activity. Financial services demand has also declined, partly linked to rising market uncertainty and expectations of higher inflation pressuring real estate and credit activities.